Smoking Out the CVS Brand

Author: Linda J. Popky

CVS, the nationwide drugstore chain, recently announced they are suspending the sale of tobacco products in their stores, walking away from more than $2B in annual revenues. To nonsmokers, this may look like a moral victory – one less place where cigarettes can easily be procured – even at a big financial cost.

But from a brand perspective this looks like a different decision entirely.

First, it’s unlikely this decision will significantly impact CVS’ revenue. At about $123B in 2013, tobacco sales were less than 2% of total revenue. Cigarettes are highly taxed. We don’t know the breakdown of CVS’ tobacco sales by high/low tax states, but it’s likely a good percentage of that $2B was pass through for taxes, leaving probably less than a 1% hit for removing tobacco products from the shelves.

What’s more relevant is that CVS felt tobacco sales were incongruent with their brand. A chain that is focused on improving health and wellness was also offering a product set that is known to cause lung cancer and premature death.

Your brand is as much defined by what you don’t do as much as what you do.

We expect Volvo dealers to offer vehicles with a high safety rating and Ferrari dealers to have a focus on speed. Whole Foods doesn’t sell products with artificial ingredients. Their decision to eliminate GMOs in food over the next several years makes sense, and it’s not surprising: it’s totally congruent with their brand.

On the other side of the spectrum, 7Eleven is all about convenient and fast, and not about fresh, organic or natural. It’s not a matter of which approach is right – they’re each targeted to different audiences and they’re both very clear on what to expect (and not to expect) within.

Unfortunately, we still see businesses that aren’t quite sure what business they’re in or what their brand really stands for to their target audience.

This happens for two reasons: Because a business starts in one market, is highly successful and then expands into other markets without considering the impact on the brand or marketing messages – confusing their customers. Or, alternatively, the core business grew up without anyone taking time to reflect on how actions or omissions would impact their brand. The result is a muddy value proposition and unclear brand value.

Ask yourself these questions:

  • Are we clear on what our brand stands for today? Can we quickly and easily articulate who we are?
  • What would we like our brand to stand for in the future?
  • If it’s something beyond where we are today, what needs to change to get us there?
  • Where do we need to streamline or focus our efforts?
  • What will we need to give up to get there?
  • What’s the potential gain and opportunity for us, and what will the cost be?

CVS’s tobacco decision, while delighting antismoking groups everywhere, is unlikely to have much of an impact on cigarette sales long term. But it may just light a fire under a stronger brand focus on health and wellness for CVS.

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